Oil prices fall as worries over global supply resurface

OPec is assessing whether to extend the reductions for another six months, Kuwait Oil Minister Issam Almarzooq said on Sunday after a meeting in Kuwait.

In November 2016, the Organization of the Petroleum Exporting Countries (OPEC) member states reached an accord to cut oil production by 1.2 million barrels per day for the first half of 2017 to boost global oil prices.

In any case the lack of an immediate extension to the output cut has weighed on oil prices as a new week gets under way in Asia.

“We believe that the rebalancing of the oil market is in fact making progress despite the record high USA crude inventories”, Goldman analyst Damien Courvalin wrote.

The price of oil fell closer to the $50 mark as OPEC and non-OPEC producers agreed to review if the global agreement to limit supplies should be extended by six months.

Oil prices had been on the upswing since OPEC members and major non-OPEC producers agreed to significant cuts in production output. “We still believe that the full and timely implementation of the decisions taken past year will see destocking accelerate by the end of the first half of 2017”, Barkindo said in his speech.

Crude oil had its third weekly loss in a month as OPEC and its allies prepared to meet for a review of their production cuts, while swelling United States stockpiles indicated the measures are not working yet. However, the crude oil price has been showing some weakness in March.

She added that “oil on water is down massively”, but she cautioned that OPEC must extend the cuts when the organisation meets at the end of May.

Prices for front-month Brent crude futures, the global benchmark for oil, were at $50.66 per barrel at 0027 GMT, up 10 cents from their last close.

Russian Energy Minister Alexander Novak believes that the countries of the OPEC and NOPEC will be able to take a decision on this matter at the May Ministerial Conference. The oil rig count has climbed every week this year so far, except for one.

In a Bloomberg interview conducted on March 19, Saudi Arabia’s Energy Minister Khalid Al-Falih said that oil market fundamentals are moving in the right direction and that OPEC will review the situation no sooner than the middle of 2017. The official reiterated the importance of monitoring markets closely, and “I think OPEC is now doing this job”. We can see in the chart below that South Korea continues to pull in more and more light crude. Stockpiles are at the highest level in weekly data compiled by the agency since 1982.